Chicago hedge fund Citadel may not have the best of luck when it comes to running traditional financial businesses (it's recent disastrous foray into advisory and capital markets - nuf said), but when it comes to picking up nickels and dimes ahead of slower traders (yes there is a name for it, but for lack of immediate legal retaliation by an uber-sensitive Ken Griffin we will leave it to our readers' imagination) by virtue of faster computers and a massive collocated infrastructure, Citadel is second to none (well, except maybe now infamous Latour Trading). Which explains why it is so sensitive to any former employees "borrowing" its special sauce, aka the computer code that is the only thing that gives the hedge fund its fro... er, superior trading execution. It was only last year that the fund went all Friend-O on Misha Malyshev, whose Teza technologies was implicated as the future employee of one now legendary Sergey Aleynikov. Well, it is time for a redux. As Dow Jones reports, "a former technology employee of hedge fund manager Ken Griffin's Citadel LLC was arrested for allegedly stealing sensitive computer trade secrets from the company for his own personal use, the Department of Justice said. According to the complaint affidavit, 24-year-old Yihao Pu, also known as "Ben Pu," was found by Citadel's information technology department to have "downloaded several unauthorized programs," which allegedly allowed him to bypass Citadel's security protocols and transfer files or data from his Citadel computer to an external storage device."

As for where this was found...

Certain files recovered from hard drives disposed in a sanitary canal near the Wilmette Harbor north of Chicago contained "alphas" or building blocks of Citadel's automated electronic trading algorithms and strategies. They also indicated that Pu was attempting to construct a trading strategy similar to the one used by Citadel, the affidavit said.

That's right: the sewer. That's how serious Citadel is when people go stealing their alpha shit: it will dig through.. well, you get the picture.

There was a time when being involved in finance meant lending and borrowing. Those days are gone. Now it is all about scalping milliseconds here and nanoseconds there.

Yeah, no kidding. Found in the sewer?! Geez, not to mention, putting any hard disk or memory stick in the microwave for about 10 seconds would frazzle any data on the drive, regardless of where you flush it later. Note to self: never hawk your programming talents at Citadel.

No, It will not. You have to physically destroy the media containing the data. The blender for a memory stick, Tree-shredder for harddrives. Or burn them. But this takes time and preparation.

In the defence gear I worked with they had a "thermite pack": A sealed aluminium tube filled with thermite then routed to larger pouches of thermite around the secret bits. The case was high in magnesium too. Even then there was a $$$ "Hammer and Nail" tool permanently attached. Using the hammer on the "nail", one was supposed to punch out specific locations to smash the chips underneath, while being overrun and supposedly with the thermite ignition countdown running for assured destruction.

The microwave just fries the electronics on a HDD. Then They will take the platters out and plonk them in an identical HDD, which may be the best outcome for all parties concerned because this saves Them & You the inconvenience of putting you in some shithole like Bagram and rubberhosing the data out of you!

So while TPTB scramble to track down Lulsec "cyber terrorists" who launch the occasional DDOS attack, here we have companies like Citadel that no longer have anything to do with sound financial analysis but are nothing more than institutionalized, subsidized, legalized hackers who seek to exploit the electronic medium of financial markets on the backs of the rest of the investing world. Not because they undertand fundamentals, or do rigorous analysis, but because they hire Chinese programmers to write their scam code. What a joke.

And I'm *sure* they compensated Mr. Pu fairly, from their point of view (giggle). Citadel is neither the first, nor the last hedge fund that's getting the rather expensive lesson that when it comes to programmers and quants, you have to pay to play and that means trader sized compensation and/or an equity stake for the programmer.

For are smart as some these people are it's suprising they throw out their hard drives into the sewer without writing zero's to them first. Hell, stick some magnets to the drive before you toss it out. Also, what the heck was it doing in the sewer and not his PC at home?

Most smart people are not smarter than "normal people" when working outside of their domain, but they naturally still think that they are smarter than everyone else; a common expert fallacy. Investment advisers and other salespeople *love* that trait in highly-paid people.

and there you have it. The Citadel admitting that they have software to front-run the stock market. This is akin to a drug dealer calling the cops and saying some criminal stole all their drugs. The SEC and FINRA are worthless piles of Ben Pu if they can't figure this one out.

I wish I could be on this jury. "so you're saying Mr Pu 'stole' and by 'stole' you mean remembered a code that you use to time the market and make trades off of?" Fuck-a-doodle-doo. You should have paid that guy so much that he never would have left. Oh. You didn't want to and he went to a competitor to replicate the process? Eat donkey shit. Pay your employees more and they won't jump ship.

automated trading platforms, no human involvement. It's like leaving a factory running 24/7 making an endless suply of product nobody uses just so you can say youre producing something.

Are the regulators afraid that if you shut down the Algo mills the market will cease to exist? It won't, it will just remove the ability for a stock to double in two months based on nothing but computers fighting over a fraction of a cent.

KG living up to his Loeb inspired gulag reputation. The idea that someone smart enough to work in their HFT unit would 1) dump code onto a thumb drive, 2) get tailed by some monkey, 3) dump the drive in a sewer when t could be physically destroyed instead 4) and right after another junior employee had been accused of same recently, is absurdly laughable. Sounds more like putting the squeeze on a soft target fobbed out H1B

Last year the newest employee at Citadel, Mr. Pu was fired for talking to a competitor.

Citadel fired one of its newest employees today after allegedly discovering that he was speaking to rival firm Teza Technologies, the firm founded by Mikhail "$150 million in 2008" Malyshev.

Malyshev and Citadel have been in legal dispute for years now. When Malyshev and a colleague left Citadel in February 2009 to start their own fund, Citadel founder Ken Griffin sued him, arguing that he signed a non-compete. (Malyshev had made Citadel over $1 billion in 2008, taking home $150 million for himself, according to legal complaints.)